ANDHRAPRADESHELECTRICITYREGULATORYCOMMISSION
4thFloor,Singareni Bhavan,RedHills,Hyderabad500004
Dated: 08-09-2016
Present
Sri Justice G. Bhavani Prasad, Chairman
Dr. P. Raghu, Member
Sri P. Rama Mohan, Member
O.P. No. 27 of 2015 & I.A. No. 35 of 2015
Between:
M/s. Sammera Paper Industry Ltd.,
932 / 2, Alamuru Road, Mandapeta – 533 308. E.G. District. .... Petitioner
And
Eastern Power Distribution Company of Andhra Pradesh Ltd (APEPDCL)
P & T Colony, Seethammadhara, Visakhapatnam – 530013. …. Respondent
O.P. No. 18 of 2016
Between:
Eastern Power Distribution Company of A.P. Ltd (APEPDCL)
P & T Colony, Seethammadhara, Visakhapatnam – 530 020. .... Petitioner
And
M/s. Vishnu Vidyut India Ltd.
Narasingabilli (Village), Kasimikota (Mandal),
Yelamanchili, Visakhapatnam District – 531 058. …. Respondent
The petitionshave come up for hearing finallyon 06-08-2016 in thepresenceof Sri Challa Gunaranjan, learned counsel for the petitioner and Sri P. Shiva Rao, learned Standing Counsel for the respondent in O.P. No.27 of 2015 & I.A.No.35 of 2015; Sri P. Shiva Rao, learned Standing Counsel for the petitioner and Sri Challa Gunaranjan, learned counsel for the respondentO.P.No.18 of 2016; Sri M. Venugopala Rao, Senior Journalist and Convener, Centre for Power Studies, learned objector in both the cases. Aftercarefullyconsideringthematerial availableon record and after hearing the arguments of the persons present, theCommissionpassedthefollowing:
COMMON ORDER
Both the Original Petitions under consideration herein involve the request for a direction to the distribution licensee to purchase the power generated by the petitioners from their respective biomass based Non-Conventional Energy generating plants and for consequential reliefs. As the core question in controversy is common, both the Original Petitions are being disposed of by this common order.
2.O.P.No.27 of 2015 filed by M/s. Sammera Paper Industry Limited is for a direction to the Eastern Power Distribution Company of Andhra Pradesh Limited to purchase the power generated from the 4.8 MW biomass based generating project of the petitioner and pay for the power to be supplied as per the generic tariff fixed by the State Commission totaling to `6.26 paise per unit under a Long Term Power Purchase Agreement.
3.While narrating the national and state scenario to promote Renewable Sources of Energy, the petitioner stated that it invested `30 crores for establishing the company and the power generating plant out of which `15.66 crores were taken on loan from Andhra Bank. The New and Renewable Energy Development Corporation provisionally sanctioned on 07-02-2011 captive use of power generated and a formal agreement was entered into on 11-01-2012. Later permission was obtained from NREDCAP also to supply the generated power to the other two group companies. The respondent approved synchronization of the plant with the grid which was done on 22-04-2013 and the Commercial Operation Date was declared on 17-05-2013 before the Paper and Solvent Oils group companies could be commissioned. The petitioner also obtained No Objection Certificate for sale of 2 MWs of power to third parties on 01-07-2013. Accordingly, the Chief Engineer, SLDC, AP Transco granted short term open access on 28-10-2013. However, the two group companies had to be closed due to bad market conditions and the management was changed through share transfer. The petitioner could not generate and consume power as there were no captive requirements and could not sell power through Open Access due to financial difficulties. Unless the petitioner enters into a Long Term Power Purchase Agreement as per the tariff and terms applicable to biomass based projects, it will turn into a Non Performing Asset. The respondent did not respond to several representations made. The APERC made Regulation 1 of 2012 and fixed the generic tariff including fixed cost and variable cost at `6.26 per unit for 2015-16. The respondent is an obligated entity under Regulation 1 of 2012 which is required to purchase power at the prescribed percentage from Renewable Energy Sources at generic tariff rates determined by the Commission. Hence, the petition.
4.I.A.No.35 of 2015 in O.P.No.27 of 2015 is for an interim relief to the same effect.
5.The respondent to O.P.No.27 of 2015 contested the petition firstly contending that the Commission has no jurisdiction to entertain any dispute arising prior to entering into a Power Purchase Agreement. It further contended that the order of the APERC dated 20-03-2004 directed that no fresh biomass plants be allowed. Again, by an order dated 27-09-2005 in O.P.No.9 of 2005, the Commission directed that no further biomass based power shall be purchased by the distribution licensees than that already committed through the Power Purchase Agreements already entered into and consented to by the Commission. Every year the Government is granting an additional tariff of `1.50 paise/kwH which is an unjustified burden on end consumers. The Commission advised in its order dated 21-06-2013 that the Discoms can allow the developers for third party sale through Open Access. The Discoms are not liable to purchase power from the biomass based plants through Long Term Power Purchase Agreements and there cannot be any direction to purchase power from a particular generator. The sanction by NREDCAP ceases to have effect once there is no captive consumption for which purpose the plant was set up. The Green Energy Corridor Project, Solar Policy of the State Government dated 12-02-2015, the direction by the Government to the Discoms to procure 1000 MW of solar power through competitive bidding, the target to set up 3500 MW solar capacity through solar parks in Kurnool and Ananthapur Districts, the Wind Power Policy, 2015 dated 13-02-2015, to achieve 4000 MW capacity, expected addition of 1016 MW capacity in 2015-16, approval for procurement of 130 MW power from Waste Energy Projects etc., make the petition liable to be dismissed. The permission by NREDCAP ceased to have effect once the plant is not used for captive consumption. Biomass fuel is not green energy and produces green house gases, harmful to environment. The petitioner cannot be permitted to enter into a Power Purchase Agreement with the respondent in view of the ban imposed by APERC and the respondent is not liable to purchase energy from the petitioner.
6.The petitioner in its rejoinder claimed that the Commission has jurisdiction under section 62 (1) (a) read with section 86 (1) (b). Any prohibition against biomass projects was not repeated in the orders of the Commission in O.P.No.16 of 2008. The order dated 20-03-2004 was set aside by the APTEL. Regulation 1 of 2012 contains the mandatory directions regarding purchase of Renewable Energy/Renewable Energy Certificates. The Commission can reconsider due to the changed circumstances and long gap of time and the Commission has to act under section 86 (1) (e) to promote the Non-Conventional Energy projects. The petitioner was allowed to sell power to third parties under Short Term Open Access on 28-10-2013 and the Commission rejected the request of the respondent to reduce the Renewable Power Purchase Obligation.
7.O.P.No.18 of 2016 is a petition by the Eastern Power Distribution Company of Andhra Pradesh Limited to pass appropriate orders on the representation of the respondent for Long Term Power Purchase Agreement with the petitioner.
8.The petitioner stated that the respondent having a 7.5 MW biomass based power plant represented to the Secretary to Government, Department of Energy, Government of Andhra Pradesh, Hyderabad through a letter dated 09-02-2016 for a Power Purchase Agreement with the petitioner on Long Term basis. Earlier when the respondent approached the APPCC for amendment of PW & PA dated 23-06-1999, the Commission did not grant consent as the Power Wheeling Purchase Agreement dated 23-06-1999 had no consent of the Commission. Therefore the respondent was allowed Open Access and is supplying power to AP Discoms on Short Term basis since 2013, for which the tariff is `5.45 as against the higher tariff permitted by the Commission and the additional tariff granted by the State Government. The orders of the Commission dated 20-03-2004 and 27-09-2005 were referred to as imposing ban on biomass based projects and the correspondence of the Commission referring to such ban was also referred. The Discoms were stated to be not entitled to purchase power from biomass based plants through Long Term Power Purchase Agreements after 2004. The petitioner opposed O.P.No.27 of 2015 on the same ground and the same information was submitted to the Government by the Chairman, APPCC. While so, the Principal Secretary to Government, Energy, I & I Department, Hyderabad instructed the AP Discoms vide letter dated 13-04-2016 to file an application before the Commission for passing appropriate orders on the representation of the respondent. Hence the petition.
9.The respondent in its counter, apart from referring the need for incentivizing Non-Conventional Sources of Energy under the statute, claimed that the project was established for 6 MW and was granted an additional capacity of 1.5 MW by NEDCAP and the change of name was approved by the NEDCAP. When the respondent was informed about the orders of the Commission declining to grant consent for PW & PA as amended, the respondent approached the State Government. Regulation 1 of 2012 subsequently issued by the Commission in exercise of its statutory powers defined Renewable Energy Sources which included biomass and any previous orders ceased to operate. The other orders referred to by the petitioner has no relevance and when there is no ban and the agreement was concluded long back, terms of the agreement can be approved on standard terms.
10.Sri M. Venugopala Rao, Senior Journalist & Convener, Centre for Power Studies in his objections referred to the tariff order for 2016-17 wherein the power purchase requirement and surplus availability were assessed. Still the State Government directed the Discoms to sign the Power Purchase Agreements for purchase of power of 4000 MW of solar wind hybrid power projects which is unwarranted. The reserve margin required to be maintained is met with the available surplus and the Renewable Power Purchase Obligation is less than Non-Conventional Energy approved to be purchased in 2016-17. The necessity to keep the power purchase cost at reasonable level should be kept in view and there is no Long Term load forecast plan or resource plan or power procurement plan for the Discoms and indiscriminate entering into the Power Purchase Agreements, Long Term or Short Term at high cost will adversely affect the orderly development of the power sector and larger consumer interest. Dangerous tendency of forcing the Discoms to enter into Long Term Power Purchase Agreements with no limitation of capacity for purchase of NCE at very high tariff without even seeking the consent of the Commission will subvert the regulatory process. Hence, the learned objector desired that appropriate directions be issued on all these aspects and requested the Commission to exercise its legitimate independence and authority within the limitations of law to protect the larger consumer interest. The Government or the petitioner did not specifically explain what appropriate orders they seek from the Commission and the Government without taking a decision on the representations of the generators passed the buck to the Commission and the petition is not maintainable. Biomass based power could have been sold at competitive prices if there is scope for competing in the market. Any fresh PPAs with biomass based developers will burden the Discoms and the consumers and the smaller capacity of the biomass power plants cannot be a justifiable basis. The Chairman, APPCC in his letter dated 11-03-2016 referred to the comfortable position of the AP Discoms to meet the Renewable Power Purchase Obligation. The biomass based plants in the State had a controversial history and additional burden on the consumers should be avoided.
11.On such material, the point for consideration in both the petitions is the impact of the earlier directions of the erstwhile Andhra Pradesh Electricity Regulatory Commission concerning biomass based power projects and the question of purchase of power generated by the generating plants of the petitioners using biomass as fuel.
12.The erstwhile Andhra Pradesh Electricity Regulatory Commission in its order dated 20-03-2004 in R.P.No.84 of 2003 in O.P.No.1075 of 2000 was considering suo motu determination of tariff applicable to Non-Conventional Energy Projects and with reference to biomass plants, it was observed in Para 64 that as against the report of the Administrative Staff College of India in 2001 that the biomass potential in the State was adequate to support a generating capacity of only 225 MWon sustained basis, sanctions have been given for about 410 MW resulting in the fuel cost of biomass shooting up. The Commission therefore felt that it is not in consumers’ interest to encourage setting up of additional biomass plants till the supply position improves. But, still the Commission appreciated the Government of Andhra Pradesh clearing eight biomass plants on the basis of additional plantations being raised towards the requirement of fuel on an experimental basis. Therefore, the Commission decided that it will not permit from that date the purchase of power from new biomass power projects other than those already sanctioned by NEDCAP/APTRANSCO, which decision will be reviewed after three years. Hence, it is evident that biomass power projects sanctioned prior to 20-03-2004 can lawfully sell power to the State utilities, even assuming that the Commission has jurisdiction and justification for issuing such a prohibitory order.
13.There is nothing on record to show that subsequent to the above order, there was any further study of biomass potential available in the undivided State of Andhra Pradesh or after division, the residual State of Andhra Pradesh or any material about assessment of performance of biomass projects existing by then or commencing commercial operation after that date or about any development of any additional sources of fuel by raising additional plantations etc., nor there appears to be any review of the decision not to permit purchase of power from biomass plants sanctioned after 20-03-2004 after three years from that date or at any time later.
14.In O.P.No.9 of 2005 decided by the erstwhile Andhra Pradesh Electricity Regulatory Commission on 27-09-2005, the Commission was considering specification for purchase of electricity from renewable sources of energy, a percentage of total consumption of electricity in the area of a distribution licensee.While recognizing biomass as a resource of Non-Conventional Energy for complying with the percentage of such energy procurement, the Commission again observed that in view of NEDCAP having already issued a large number of sanctions for setting up of biomass based power plants, no further biomass based power shall be purchased by the distribution licensees that that already committed through the Power Purchase Agreements already entered into and consented to by the Commission. It is clear from the said observation that what the Commission sought to prohibit was purchase of such power by the distribution licensees through any new Power Purchase Agreements but not the setting up or bringing into commercial operation such power plants, the power produced from which could have been otherwise sold to persons other than the distribution licensees operating in the State of Andhra Pradesh or utilized as captive generation. Significantly this order did not refer to the review contemplated by the earlier order dated 20-03-2004 or the other relevant factors referred to in that order.
15.The order of the erstwhile AP Electricity Regulatory Commission in R.P.No. 84 of 2003 in O.P.No.1075 of 2000 dated 20.03.2004 as modified by the order dated 07.07.2004 in R.P. No. 05 of 2004 etc., was the subject of Appeal No. 01 of 2005 and batch decided by Appellate Tribunal for Electricity on 02-06-2006 and the appeals were at the instance of both the developers and the Discoms and Transco. The Appellate Tribunal for Electricity in its detailed analysis clearly concluded that the regulatory Commission has no power to arrogate itself with absolute power ignoring the provisions of the Act.
16.The Appellate Tribunal for Electricity held that the only function of the Commission in respect of the generating companies is to regulate the purchase price of power when the licencee enters into an agreement with a generator for purchase of power. Such regulation of purchase of power by a licencee from a generator under sec 86(1)(b) could only be pursuant to terms of a bi-lateral agreement which the generators and licencees entered between themselves, while alsodealing with the principles of promissory estoppel and legitimate expectation.
17.The APERC was held bound to act within the four corners of the AP Electricity Reform Act, 1998 or the Electricity Act, 2003. Incidentally the Appellate Tribunal for Electricity also concluded the impact of payment of higher price to Non Conventional developers on retail tariff to be negligible in the context of cumulative benefits of energy from renewable sources. The Appellate Tribunal for Electricity categorically held that the State Electricity Regulatory Commission has no executive power or a plenary power and it has no authority or jurisdiction to compel the developer to sell power only to APTRANSCO or AP Distribution Companies.
18.This decision of the Appellate Tribunal for Electricity was the subject of CA 2926/2006 and batch before the Hon’ble Supreme Court of India decided on 08-07-2010. The Hon’ble Supreme Court noted that the order of the State Regulatory Commission dated 20-06-2001 read with the earlier order was implemented willingly by the parties which lead to the order dated 20-03-2004 for determination of tariff. The Hon’ble Supreme Court set aside the order of the Appellate Tribunal for Electricity dated 02-06-2006 upholding the jurisdiction of the Commission for determination of tariff.
19.It should be noted that either before the Appellate Tribunal for Electricity or before the Hon’ble Supreme Court, the issues under consideration herein were not raised or considered or decided. However, the Appellate Tribunal for Electricity, as already referred to, clearly held that the Commission cannot travel beyond the language and content of the State Act or Central Act. The Hon’ble Supreme Court while disagreeing with the Appellate Tribunal for Electricity on its conclusion about the right of the Commission to fix the Tariff traced such power to the statutory functions under the Act, which was even construed to be a specific statutory obligation. The Hon’ble Supreme Court emphasized that it is necessary that the Regulatory Commission takespractical decisions which will help in ensuring existence of these units rather than their extinguishment. With respect to the case in APERC Vs RVK Energy Private Limited (2008)17 SCC 769, the Hon’ble Supreme Court noted that the regulatory power does not ordinarily extend to prohibition or positive direction for entire supply to APTRANSCO alone and such prohibition may be resorted to in exceptional situations. It may be noted that the Hon’ble Supreme Court did not specifically disapprove/overrule the Appellate Tribunal for Electricity which held that the function of the Commission in relation to a generator is only to regulate purchase price of power payable by the licencee under a bilateral agreement.